VIEW: Westpac Says The “Economy Hit The Wall”

Westpac notes that the economy stalled in Q3 and particularly focuses on the declines in per capita terms; GDP per person fell 0.5% q/q. Flat consumption growth took them by surprise and they point out that it shrank 0.6% per capita.

• The 1.3% q/q and 4.3% y/y decrease in real disposable income is weighing on household spending. “The intense headwinds of high inflation, sharply higher interest and additional tax obligations are having a significant impact, leading to a sharp decline in real household disposable income.”
• “Overall, the update is a bleak one for households with incomes under intense pressure, diminished scope for support from savings and some temporary timing effects around vehicles likely to drop out of the spend profile.”
• Net exports was a sizeable negative for activity, subtracting 0.6pppts. Imports increased by 2.1%, led by an 8.4% rise in services as more of us holidayed abroad. Exports slipped, declining by 0.7%, with a 1.9% rise in services more than offset by a 1.2% decline in goods centred on a reduction in resource shipments, down 3.7%.”
• “Total inventories added 0.4ppts to activity, including: non-farm business inventories, +0.9ppts (on a rebuild of mining inventories); public authority inventories, -0.4ppts; and farm inventories, -0.1ppts.”